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It’s Time for a Renewed Look at Non-Interest Income

What components of non-interest income are affecting your credit union’s performance?

The credit union industry made $4.58 billion in 2010; that is three times what it posted in 2009. Yet in today’s record-low interest environment, most credit unions are not increasing income, they’re reducing provisions for loan losses and searching for ways to lower total operating expenses.

In addition to interest rate challenges, credit unions have had to contend with new or revised regulatory and legislative imperatives during the past three years. Implementation of the CARD Act, Regulation E, and the Durbin Amendment (if it takes affect as originally planned) are all occurring within a 24-month period, and each has potential to reduce credit unions’ non-interest income.

The 5300 Call Report requires credit unions to report two non-interest income accounts: fee income (account 131) and other operating income (account 659). At year-end, credit unions reported $12.1 billion in fee income and other operating income. That’s 23.0% of total income.

Fee income and other operating income have grown over the past year at an annual rate of 4.9%, despite Regulation E taking affect in the third quarter of 2010. Non-interest income as a percentage of average assets, a more stable metric, decreased two basis points in 2010 to 1.34%. Fee income decreased four basis points while other operating income increased two basis points.

Beyond the two broad categories reported on the 5300, there is anecdotal evidence that non-interest income at credit unions is fluctuating. Callahan & Associates' year-end 2010 non-interest income survey breaks down fee income and other operating income into several categories — such as credit and debit card interchange, non-sufficient funds charges and courtesy pay, real estate fees, and ATM surcharges — for a better understanding of the specific components that comprise non-interest income. Have your voice heard; click here to take Callahan's 2010 Non-Interest Income Survey.